I've been on the combine since March. I screwed up the first couple. Kept paying. I think I've made maybe 1 deposit since May or June. Been rolled over every time except for one that I didn't turn any profit in the 2 week period. So... They aren't making much off of me, at least.
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Couldn't say much about that, one way or another. I don't see their numbers, and, of course, neither of us are going to.
The thing I was responding to was the assertion that, basically, they are just ripping people off, collecting fees for nothing.
Maybe they do depend on fee income, maybe not.... Everyone can decide whether his/her trading skills make the Combine worth it. Probably most will not succeed, as most who trade do not succeed. But that's a decision where all the factors are, I think, out in the open and you can take it or leave it alone.
If that's the case, there is no unfairness, just a deal to take or not. It's up to you whether it weighs out well for you.
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Seeing financial statements is not necessary. And my comment was also not about is TST a rip off or not.
Real prop firms have been around for decades. Trading arcades have also been around for decades. They have very different business models. Real prop firms have payout percentages anywhere around 40-60%. They didn't just pull that number out of thin air. But then again, they don't have a constant stream of income from people re-doing combines. All of TST's rules and payout structures are available on their website. Moving on...
Diversification is the only free lunch
Last edited by DarkPoolTrading; October 19th, 2015 at 11:51 AM.
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I understood that. I was originally posting in response to comments by others that it was.
I think that's probably correct.
I'm doing Combines, and adding to their income, because I can't trade futures for sh**, and the discipline of their structure helps me. If I could trade, I wouldn't be that interested in the funding, I'd just be trading. (Not that I'll turn it down if/when I get it.)
As someone who worked for a prop firm, I would like to bring up a couple of points. Trading industry changed a lot in last couple of decades and so did the prop firms. Some focus on a specific trading style, some only on certain markets. 40-60% payout makes sense for a trader only if you get something of great value back. Based on my personal experience, it could be access to certain exchanges/products, risk management infrastructure, reduced roundturn costs/rebates.
As for education, I would say overall no-one will tell you anything you cannot find online or in books. Sharing experience can be of value, but it seems to be a quite subjective factor.
If we talk only about discretionary directional trading of liquid futures/stocks, why would one be giving away 60-40% of profits? Or rather, what can one get back from a firm (even hypothetically)?
If you look online at firms like SMB or Futex, they got into trading education long time ago and I would definitely think twice about how much they make in profit splits.
Topsteptrader's model makes perfect sense (to me) in this regards. I am not judging this based on their business model and how much they are making from subscriptions vs trading profits (as far as I know they are only a scouting firm so profit split goes to the actual backer, as far as I understand). But rather from perspective of a trader looking for funding.
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What are the guidelines as far as being dropped from funded status. Let me be more clear, If I am a funded trader, at what point, does TST say your draw-down on the account is to low, thus TST cannot continue to allow you to trade the funds we have put up for you to trade with. Is there a location on TST website that explains this? And also another question if I may. What happens to the majority of funded traders after they become funded traders?, not the ones that soon crash and burn, but the ones that continue to grow as successful traders? Do most go off on there own, or are there other avenues they are exposed to that may offer larger funding amounts based on there performance?
TST only 'backs' you for 10 days. That's it. No more.
When you go live they specify your drawdown limit as per the rules. After 10 days that drawdown magically disappears and you're left to trade solely on whatever profits you have made in those 10 days and cannot go back down to zero. So basically TST 'funds' you for 10 days. If you've only made a couple hundred bucks in those 10 days and it is perfectly in line with your average profit that you made during your combine, they don't care, your funding disappears and you trade solely on whatever you have managed to make in 10 days. ie: your profit is your allowable drawdown.
Diversification is the only free lunch
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Well, that's right as far as it goes. They will absorb your losses up to the max drawdown, and after 10 days, if you have a loss you are out. After that, you can't go to zero. That's all correct.
But, if you continue to grow the account, you can increase your contract size according to a schedule based on the max size attained. It may seem that this is no big deal, since you have to have the profits to qualify for the increase, but in fact, if you make withdrawals, or have losses that bring the balance down, the max contract size does not shrink down to something that is dependent on your current balance -- which is how it would work in you own retail account, where the account balance is your margin, and determines your allowable size.
In other words, the high point that your balance attained determines the number of contracts, your buying power, that you have to work with. It is not set by the current level of your balance.
That increased size, which is not limited by your current balance, is indeed continued "backing." They are putting up some capital as margin with their broker that you do not have to have in your account.
Quoting: "The lot size will increase according to the graph below, as you build equity. Once you reach an increase in buying power, it will not decrease if you make a withdrawal or if your balance decreases. Once your account balance is greater than 10K, you can request more buying power."
So you could be sitting with a fairly small retained balance in your account and be trading many more contracts than your balance would justify, if it were margin in your individual retail account. The additional buying power is supported by TsT's total margin position with its broker. They aren't going to put themselves in that position without you showing that it's a good risk. But there is a risk they are taking, and there is financial backing to you. In the meantime, you could have taken some of those profits and put them in your bank. Your number of contracts won't be decreased because the money is no longer there.
Obviously, the smart thing for the trader to do would be to periodically take withdrawals out, while keeping enough of a reserve against losses. And it's up to the trader to decide what's a safe level for him, and he should be prudent about it. But if he has done that and still wipes the account out, his loss is whatever he had in the account at the time; TsT takes the rest of the hit (and there is a "rest", because their margin was supporting that part of his trades that was not covered by his balance.) He keeps whatever he already took out.
One can get into semantics about what is "backing," or about anything else, for that matter. But this is the actual, full situation, whatever you call it.
Thanks for the clarification, especially about the increasing buying power part. One thing I'm still not clear is this: with increasing buying power, does the funded trader's allowed intraday loss increase too? For example, for a funded trader just starting out, he maybe allowed to trade 2 contracts, with max $1000 loss per day. When he successfully builds equity, he is now able to trade 3, 4, or 5 contracts. If the $1000 limit stays, then the increased buying power is meaningless.
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